Sony takes on Facebook's Oculus in virtual reality race

By Cliff Edwards Bloomberg News

Posted:
06/09/2014 02:31:18 PM PDT

Now it's Sony versus Facebook.

After being knocked around by Apple and Samsung Electronics for more than a decade, Sony is up against yet another tech rival, attempting to build the PlayStation 4 into an entertainment powerhouse and develop a virtual-reality headset for the gaming market.

And, in this fight at least, the Tokyo-based conglomerate, which has lost money in five of the last six years, might have an edge. Sony's commanding lead in sales of video-game consoles could give a boost to the Project Morpheus headset the company showed off Monday at the Electronic Entertainment Expo. The chief competition is Oculus VR, the virtual-reality goggle pioneer being acquired by Facebook.

"You not only have the weight of Sony, you have the weight of a renewed Sony gaming business, and have to factor in the fact they make TV shows and movies," said Mike Vorhaus, senior vice president of the research firm Frank Magid Associates.

The video-game division at Sony is one of the few bright spots for a company whose television business hasn't been profitable in about a decade and whose smartphone and tablets are perennial also-rans to those from Apple and Samsung.

Gaming is just the first killer application for virtual-reality headgear, which could become standard gear for experiences that put users closer to or even inside the action, from watching sports to taking classes online.

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Sony's movie and television studios can feed its consoles with virtual reality-ready fare, and the Project Morpheus headset could help attract non-gamers. Chief Executive Officer Kazuo Hirai's idea is to deliver an array of offerings via the Web to challenge Apple, Samsung, Google and, now, Facebook.

To succeed, "PlayStation needs to expand its user base," Hirai said last month.

The Oculus headset, called the Rift, has to connect to a high-powered PC to perform well. Morpheus works with the PS4, which has souped-up hardware and high-definition audio. More than 7 million PS4s have sold since its debut in November, and there are more than 100 million PlayStations operating around the world.

While virtual-reality goggles have been demonstrated for decades, it's only now that screen technology has gotten cheap and light enough for mass-market opportunities.

"Sony getting into the mix helps. They're invested in being an early adopter and one of the first to figure out how virtual reality and gaming entertainment work together," said Oculus CEO Brendan Iribe. "We still feel like we have the superior, best VR out there."

Facebook said in March that it planned to buy Irvine-based Oculus for $2 billion. "The technology opens up the possibility of completely new kinds of experiences," CEO Mark Zuckerberg said in a Facebook post.

At the E3 conference last year, Oculus wowed gamers and won best of show in the hardware category. The startup, which raised $2.4 million in a Kickstarter crowd-funding campaign, has sold more than 80,000 developer kits and is racing to make a retail prototype, Iribe said.

Sony and Oculus have worked with each other to improve their respective headsets, Iribe said, though the two probably will be incompatible because they use different software to get the devices to talk to applications.

Both companies' prototype devices will push Google, which is already selling its Glass smart glasses, Microsoft and others to take virtual reality research beyond skunk works status, Vorhaus said.

Valve, the closely held developer of sci-fi video game Half-Life and owner of the Steam video game download service, last month demonstrated its own headset. Samsung is interested in making a unit to work with its mobile devices, according to Engadget.com, which cited sources it didn't name.

Sony, with the largest current-generation console-installed base and active network of players, may be best equipped to attract game developers, said Michael Pachter, an analyst at Wedbush Securities in Los Angeles. "They know consumer electronics, game publishing and game developer relations."

So far, big developers have said they need to see more before committing. "It is an anti-social technology, but we will support it to the extent it's brought to market and it works for our games," Take-Two Interactive CEO Strauss Zelnick said in a May interview on Bloomberg Television.

"For a core gamer, it could be a wonderful experience, someone who really likes to be immersed," Zelnick said. "But a lot of people who play video games, for example my kids, they play with their friends sitting next to them, so that technology is not going to appeal to them."

Sony plans this year to deliver its PlayStation Now game download service, as well as an Internet television service, Hirai has said. The company is attempting to streamline its businesses by selling underperforming units and cutting jobs.